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Cablegate: U.S. And Vietnam Agree to Open Skies Cargo Regime

VZCZCXRO6171
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #1215/01 3020404
ZNR UUUUU ZZH
R 280404Z OCT 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 8669
INFO RUEHHM/AMCONSUL HO CHI MINH 5248
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGP/AMEMBASSY SINGAPORE 2667
RUEHKO/AMEMBASSY TOKYO 5929

UNCLAS SECTION 01 OF 02 HANOI 001215

SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND EEB/TRA
STATE FOR EEB/TRA TERRI ROBL AND VIKI LIMAYE-DAVIS
SINGAPORE FOR FAA MARY WALSH
USTR FOR DBISBEE
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: ECON EAIR EIND EINV ETRD VM
SUBJECT: U.S. AND VIETNAM AGREE TO OPEN SKIES CARGO REGIME

REF: HANOI 1113

HANOI 00001215 001.2 OF 002


(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED (SBU). NOT FOR
INTERNET DISTRIBUTION.

1. (U) Summary: Delegations from the United States and Vietnam
agreed ad referendum to an Open Skies regime for cargo services on
October 7 following two days of talks in Hanoi. The new agreement
will renew the 2003 Air Transport Agreement for three years and the
delegations intend to meet within two years to work toward further
liberalization, including a possible exchange of fifth freedom
passenger rights. The main impediment to a full Open Skies
Agreement was the GVN's unwillingness to grant U.S. carriers fifth
freedom passenger rights over Japan. End summary.

VIETNAM AGREES TO OPEN SKIES CARGO REGIME
-----------------------------------------

2. (U) Delegations from the United States and Vietnam agreed ad
referendum to a new Open Skies regime for cargo services following
two days of talks in Hanoi, October 6-7 2008. The cargo
arrangement, which incorporates seventh freedom rights, provides
increased flexibility for U.S. cargo carriers such as FedEx Express
and UPS, which currently operate in Vietnam, including the right to
move goods between Vietnam and third countries. While the agreement
does not permit intermodal cargo surface transport across Vietnam's
border, the GVN's Ministry of Transport indicated that it may lift
that restriction after further consideration.

3. (SBU) Lai Xuan Thanh, the Deputy Director General of the Civil
Aviation Administration of Vietnam (CAAV), who led the Vietnamese
side at the talks, pressed the U.S. to introduce new language into
the agreement that would have restricted U.S. cargo carriers from
establishing hubs at Hanoi's Noi Bai and Ho Chi Minh City's (HCMC)
Ton Son Nhat International Airports. Thanh, moreover, sought the
introduction of a provision specifying central Vietnam's Chu Lai
International Airport as the only airfield in Vietnam where U.S.
cargo carriers could establish hubs. (Note: The GVN is spending
$700 million to transform Chu Lai Airport into an air cargo
transport hub as part of a greater economic development plan for
central Vietnam. End note).

4. (SBU) The U.S. side retorted that new restrictions on where cargo
operations could be based would revoke rights already held by the
USG under the current agreement. The GVN ultimately agreed to
exclude new language from the agreement and to allow cargo-basing to
be determined by conditions at the relevant airports. Vietnam's
interest in developing the Chu Lai airport was noted in the
Memorandum of Consultations.

PASSENGER FIFTHS STILL A PROBLEM
--------------------------------

5. (SBU) The negotiation discussions on liberalizing passenger
services were problematic. Although the Vietnamese delegation
offered to eliminate designation and frequency restrictions on
passenger routes contained in the old agreement, Vietnam remained
unwilling to grant U.S. carriers fifth freedom passenger rights over
Japan. (Comment: According to U.S. carriers, fifth freedom rights
are essential for commercially viable new service to Vietnam. The
failure to conclude an agreement on fifths means that new U.S.
passenger service to Vietnam is unlikely in the short term,
including flights by Northwest Airlines, which had hoped to expand
its route network by initiating service on the underserved
Tokyo-HCMC route. For now, United Airlines remains the only U.S.
carrier to offer direct service from the United States to Vietnam.
End Comment).

6. (SBU) Explaining the GVN's unwillingness to exchange fifth
freedom rights with the USG, Thanh claimed Vietnam had tried but
failed to secure fifths from the Government of Japan (GOJ) during
bilateral aviation talks in May 2007 and noted that such rights were
necessary for Vietnam to offer direct services to the U.S. The U.S.
side pointed to evidence on the website of the GOJ's Ministry of
Land, Infrastructure, Transport and Tourism (MLIT) indicating that
Japan, in fact, did offer Vietnam limited fifth freedom traffic
rights at the 2007 talks.

7. (SBU) Thanh responded that the 2007 agreement merely gave
Vietnam's carriers the right to make technical stops in Japan (i.e.,
refuel without taking on passengers). (Note: Members of the U.S.
delegation had heard from Japanese sources that Vietnam had either
refused the fifth freedom rights offered by Japan or asked Japan to

HANOI 00001215 002.2 OF 002


defer the rights for several years until Vietnam Airlines was
prepared to begin flights on its long-planned HCMC-Osaka-Los Angeles
(LAX) route. End note.)

8. (U) Thanh concluded that while Vietnam recognized the economic
benefits that expanded passenger services would bring, the GVN
needed to provide for "minimal equality" of opportunity for Vietnam
Airlines and a "balance of interests" between the passenger carriers
of both sides. The U.S. side countered that broader economic
interests would be served by opening new service, and that the USG
does not perceive aviation relations as a zero sum game. The two
sides intend to meet again within two years to work toward further
liberalization, including a possible exchange of fifth freedom
passenger rights.

MICHALAK

1

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